The Delhi High Court has quashed a tax demand amounting to Rs.2.4 crore against Mudita Express Cargo Private Limited citing insufficient reason for rejection of the response to the Show Cause Notice (SCN). The ruling came in response to a petition filed by the company challenging an order issued by the tax authorities.
The case centred around an SCN dated September 25, 2023, where the Goods and Services Tax ( GST ) department proposed a substantial demand against Mudita Express Cargo Pvt. Ltd. The petitioner company promptly responded with detailed replies on October 25, November 2, and November 14, 2023, providing comprehensive explanations along with supporting documents.
However, the order passed by the Commissioner of State Goods and Services Tax ( SGST ), Delhi disregarded the petitioner’s detailed responses.
The High Court noted with concern that the rejection of the petitioner’s replies lacked sufficient justification.
The petitioner, represented by Mr. Ruchir Bhatia and Ms. Deeksha Gupta contended that they had submitted detailed responses with supporting documents to the SCN. They argued that the rejection of their replies as incomplete and unsupported lacked merit, as their submissions adequately addressed the issues raised.
The respondent revenue, represented by Mr. Rajeev Aggarwal, ASC with Ms. Shaguftha H. Badhwar, Mr. Prateek Badhwar and Ms. Samridhi Vats argued that the petitioner’s replies to the SCN were insufficient, lacking in adequate documentation, and failed to clarify the issues raised. They contended that the petitioner’s responses did not satisfactorily address the concerns outlined in the Notice, warranting the confirmation of the tax demand.
The court found that the proper officer had dismissed the petitioner’s responses on grounds of being “incomplete, not duly supported by adequate documents, and unable to clarify the issue”. This led to the court’s observation that the officer failed to apply due diligence in assessing the petitioner’s submissions.
Moreover, the court highlighted the absence of any indication that the respondent authority had requested further clarification or additional documents from the petitioner before arriving at their decision. This procedural lapse further raised doubts about the fairness of the assessment process.
The division bench comprising Mr. Justice Sanjeev Sachdeva and Mr. Justice Ravinder Dudeja set aside the impugned order, emphasising the importance of a thorough and fair evaluation of the petitioner’s responses.
The court ruled that the respondent authority must reconsider the matter, giving due consideration to the petitioner’s submissions.
Further, the court granted Mudita Express Cargo Pvt. Ltd. an opportunity to file a further reply to the SCN within 30 days.
The bench emphasised the importance of tax authorities conducting thorough and reasoned assessments while respecting the rights of taxpayers to a fair hearing.
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